Indonesia Market Summaries 30 June 2014

PT Bank Pembangunan Jawa Barat & Banten Tbk (BJB, BJBR, Rp 825, SELL, TP Rp 850)
Mr Irvan Ahmad, one of the new directors of BJB, passed the fit and proper test, held by Otoritas Jasa Keuangan (OJK). That makes two other new directors have not passed the fit and proper test. (Kontan)


Lembaga Penjamin Simpanan (LPS) stated be able to handle the closing of 40 small troubled banks because it already has the assets to Rp 47,92 trillion by the end of May. The funds are largely derived from premium income of the banking industry. (Investor Daily)

The capital expenditure (capex) of PT Indomobil Sukses Internasional Tbk (IMAS, Rp4.900) at USD 600 million or equivalent to Rp 7,17 trillion. The funds will be used for the construction of 20 new stores. (Bisnis Indonesia)


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Mitra Pinasthika Mustika Auto will distribute Nissan

PT Mustika Pinasthika Mitra Tbk (MPMX, Rp970), owned by Saratoga Capital Group company, through its subsidiary, Mitra Pinasthika Mustika Auto (MPM Auto) will distribute Nissan car.

The plan was based on cooperation between dealer sales and service agreement with PT Nissan Motor Distributor Indonesia (NMDI) on August 23. The agreement will make MPM Auto as one of the official Nissan dealer.

MPM Auto will support Nissan in retail sales and the needs of dealership network to boost their market share in the near future, along with market support for the secondary principal from Japan.

PT Indomobil Sukses Internasional Tbk (IMAS, Rp4.925, BUY, TP RpRp6.000) will also have the advantage, because of the additional independent dealers will help launch Datsun LCGC.

Through IMAS, Nissan only has 90 dealers, under Toyota which has 240 dealers (83 PT Astra International Tbk / ASII dealers and 149 independent dealers), while Daihatsu 200 dealer (96 ASII dealers and 100 independent dealers). IMAS will also earn additional contribution of revenue because it has a 25% NMDI stake as a wholesale seller.

On the other hand, MPMX also being set Rp 150 billion for buyback. Issuer has delivered a notice to the stock exchange and capital market authorities with a maximum purchase price of Rp 1.150.

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Indomobil Sukses Internasional present Autobacs Seven to Indonesia

PT Indomobil Sukses Internasional Tbk (IMAS, Rp5.300, BUY, TP Rp6.000) established a joint venture with a Japanese automotive parts retailer, Autobacs Seven. Through its subsidiary, PT Central Sole Agency, IMAS established PT Autobacs Indomobil Indonesia to reach the wholesale distribution market of auto parts and accessories.

The amount disbursed for capital in this joint venture is U.S. $ 18 million or equivalent to Rp 181,18 billion, where as many as 51% of the portion owned by Central Sole and 49% owned by Autobacs.
Autobacs Seven is a pioneer of one-stop retail and department stores in Japan. Their services are automotive goods, services installation, car's selling and buying, car maintenance and inspection, and cars painting.

On the financial statements of 2012 which was recorded in March 2013, Autobacs scored global sales worth 230 billion yen or equivalent to Rp 23,26 trillion, and net profit of 8 billion yen or equivalent to Rp 809,25 billion. In the global network, the company has 552 stores in Japan and 27 stores in other countries.  [11 in France, 6 in Taiwan, 4 in Thailand, 3 in Singapore, 2 in China and 1 in Malaysia]

The subsidiary profits for IMAS is an expectations of increasing demand for car accessories which associated with car sales increased and Indonesian population demographics. The subsidiary can help IMAS to strengthen the auto parts business in 2012 by contributing gross profit of 25%.

For long term, IMAS predict its new subsidiary will add 3% -5% of company revenue and will make its net margin improved compared to segment dealers.

In terms of consolidation, the contribution of Autobacs Indomobil will donate 2% -3% for IMAS' net income proportionately on 51% ownership. This business is likely to commence in 2014 with the opening of a new store in Serpong area.

The investment cost for the next 3 years is expected at U.S. $ 6 million, equivalent to Rp 60,42 billion, mainly for 5 stores opening in 2014, 10 stores in 2015 and 10 stores in 2016. The business is also open for franchise opportunities.

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Indonesia Automotives sales is on the right track at first-quarter 2013

Official March auto sales were released on Friday; both aligned with preliminary data. Performances are relatively on-track with bias upward revision on the 4W segment, but we remain vigilant on the government’s plan in announcing a new policy limiting fuel subsidy, which may give a negative sentiment in the short-term. Maintain Neutral on ASII (TP: Rp7,900) and Buy on IMAS (TP: Rp6,150)

4W sales came at 95,936 units (+9.1%yoy; -7.1%mom). Considering the very strong February sales at 103,284 units, the reduction in March volume should not be considered a weakening trend as it is also still higher than the monthly average volume during the strong 2H12 at 96,828 units. As we all know, 2H volumes are seasonally higher than 1H. Toyota volumes weaken by 1.7%yoy or 7.2%mom, though it reportedly managed to sell 1,289 units of Etios Valco (launched on March 11). However, Astra’s performance was strongly offset by the strong sales of Daihatsu (+19.6%yoy; +15.5%mom). Nissan, on the other hand, booked a very weak sales of 4,648 units (-24.5%mom; -22.5%yoy).
On cumulative basis, 1Q13 4W sales came at 295,909 units (+18.0%yoy; -1.3%qoq), accounting for 24.2% of our 1.2mn units full-year estimate (+9.6%yoy), versus historical realization of 24.3% on average (range: 19.4-27.0%). The strong growth was driven by Honda (+228.8%yoy; +16.7%qoq) and Suzuki (+70.4%yoy; -6.4%qoq), mostly due to strong products launching (i.e. Honda CRV, Honda Brio, Suzuki Ertiga).
On the 2W segment, March sales came at 665,334 units (+7.4%yoy, +2.4%mom), marking the highest sales since February 2012, likely due to the effect of fast-forwarded sales ahead of the effective implementation of LTV ruling for sharia banks on April 1. Industry growth was mostly driven by Honda (+26.0%yoy; +2.4%mom), thanks to its aggressive new products launching and strong dominance in the less-sensitive upper-class 2W models.
Cumulatively, 1Q13 2W sales came at 1.9mn units (+1.5%yoy; +3.0%qoq), accounting for 26.4% of our full-year forecast of 7.4mn units (+5.1%yoy). Honda continued to be the outperformer with sales growth of 13.7%yoy and 17.9%qoq, boosting its market share to 61.7%. That said, Honda’s performance is already ahead as it has achieved 27.6% of our full-year estimates of 4.3mn units (+7.2%yoy). We expect Honda to experience a milder impact from the sharia law.
As we had highlighted in our earlier Sector Report on March 14, regulation noise from the government’s plan to curb fuel subsidy spending remains the concern going forward. If the government decides to raise the subsidized fuel price, historical patterns suggests a short-term negative impact of 3-6 months long for auto sales. In our view, the announcement of fuel subsidy policy would also be the key to pave the way for the release of LCGC regulation, which had been delayed.

Indomobil Sukses Internasional weak but expected

Indomobil Sukses Internasional: FY12 weak, but expected (IMAS, Buy, Rp5,500, TP: Rp6,150)

We reduced our TP on IMAS from Rp6,550 to Rp6,150 as we incorporate weak FY12 results into our model. We retained 80k units of Nissan sales assumption this year, but lowered operating margins to factor in dealerships roll-out. Weak 4Q12 was largely anticipated, and does not really make a difference given the tender offer price floor protection. We retain our BUY call. Downside is protected, while upside could be rewarding, in our view. Post-acquisition, Salim should also have more incentives to grow IMAS.

Weak FY12 results were partially driven by Nissan dealership expansion that was not supported by pick-up in sales volume. This year, Nissan would continue to expand its dealership by opening 20-25 outlets from the existing 85 outlets. The 24-29% growth in dealership number would lead to higher cost/sales, as we only expect a 19% volume growth for Nissan. We slashed FY13F operating margin assumption to 3.8% from 4.1%, but still expecting an improvement YoY.

While it is painful in the short term, expanding dealership network is the key to long-term success in the Indonesian market. It enables Nissan to strengthen its secondary market, a key to win both consumer and corporate customers. The decision to continuously expand, despite declining market share, is also the right one, paving the way for the launching of Datsun LCGC in early 2014.

Indomobil Sukses Internasional Protected Downside

Indomobil Sukses Internasional: Protected downside (IMAS, Rp5,550, Buy, TP: Rp6,550)

We recently paid a visit to IMAS, discussing the latest update on key issues like tender offer progress and earnings outlook. We retain our Buy call as we view the tender offer price as a floor than a ceiling. While downside is protected, the upside could be rewarding, such as from the potential launching of All New Nissan Livina. Our key takeaways from the visit are summarized below. More details and other key issues are available in a Company Focus report released yesterday.

Tender offer progressOn March 4, Gallant Venture (GALV) has received SGX approval on IMAS acquisition. Referring to the latest indicative timetable, GALV expects to conclude the takeover on May 2. The tender offer, pending OJK approval, will proceed right after, no later than June 13 as the deadline. GALV has no intention to privatize IMAS, thus the tendered shares would be refloat back. Timeframe is not specified, but it is required to be within less than two years.

Earnings outlook
4Q12 results are likely below our and consensus, due to weak volumes and higher discounts. Discounts are still persistent; thus we expect some downside in our FY13F margins. We may also lower the mining contracting revenues, but thankfully this division contributes only about 5% to IMAS gross profit. Our FY13F NPAT is now 7% above consensus.

Upside from All New Livina
Assuming no new models, IMAS may revise down FY13 Nissan sales volume target from 90k to 80k units, making it in-line with ours. The revised guidance may turn out to be conservative if a new Livina is launched, which is very possible as the model is reaching the “usual” lifecycle (6-7 years). If a new Livina is launched, we think this could bring a surprise in 2013-14 Nissan volumes. Livina now is the biggest contributor to Nissan volumes with >3k units.

Maintain Buy
Share price downside is protected by the tender offer, but upside could be rewarding, in our view. While some see it as an overhang, we rather view the proposed Rp5,425/share tender offer price as a price floor than a ceiling. We also do not see strong intention for GALV to privatize IMAS. The stock now trades on 12.7x FY13F PE or 13.7x on consensus.

Indomobil Sukses Internasional More details on the new modified Evalia

Indomobil Sukses Internasional: More details on the new modified Evalia (IMAS, Buy, Rp5,400, TP: Rp6,550)

Subsequent to our yesterday’s comment on the newly launched modified Nissan Evalia, Nissan Motor Indonesia sent a press release detailing the specifications and prices. The company officially refreshes the existing SV model with additional new features and launches St model as a new line-up, aimed to provide better comfort at an affordable prices.

The SV variant – Nissan refreshed this model by refining its seat back material and installing an additional rear cooler and flush window. Previously, rear cooler and flush window can only be found in the highest XV variant. Based on our observations, prices are slightly raised by Rp10mn to Rp172mn for manual transmission (from Rp162mn) and Rp182mn for the automatic transmission (from Rp172mn). These imply a 5.8-6.2% increase, which is justifiable given Rupiah depreciation and rising raw material prices. For the high-end XV type, Nissan also raised the price to Rp182mn for the manual transmission (from Rp175mn) and Rp192mn for the automatic transmission (from Rp185mn)

The St variant – This variant is totally a new line-up, which we believe is used as a strategy to tap lower-end consumer segment with better features as compared to the lowest S segment that is being targeted for corporations. The features offered include power window, third row head rest, seat leg cover, inside door handle finisher, seat back material, and rear cooler air conditioning system. Offered in a manual transmission, Nissan priced this variant at Rp155mn, about 6% more expensive than the lowest-end variant but 10% cheaper than the manual transmission SV type.

No price increase for low-end model – In the new price list, we note that Nissan has increased selling prices by 4.9% on average (range: 3.8-6.2%), but not for the lowest-end S type that is relatively unchanged at Rp146mn (previous price: Rp145mn). We believe this is part of Nissan’s strategy in tapping the lucrative corporate segments, which believed to account for about one-third of the total domestic 4W sales.

Recommendation – Our forecast assumes 2,000 units of Evalia sales per month, yielding annual sales of 24,000 units for this year, forming 30% of our total 79,900 units of Nissan sales. For every 1,000 units additional Evalia sales per year, we estimate a 0.8% increase in IMAS’ EPS. At the moment, we have a Buy call with Rp6,550/share target price. IMAS would release 4Q12 results this month, which we think may not be as strong. Ramping-up 1Q13 sales would be the catalyst, in our view. IMAS now trades at 12.3x FY13F PE.

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